Zimbabwe entity to absorb 100 mln USD bad loans from banks

A state entity created by the Zimbabwe government last year to clear non-performing loans (NPLs) in the banking sector has taken over nearly 100 million U.S. dollars in two months, Finance Minister Patrick Chinamasa said Wednesday.

Zimbabwe's banking sector is saddled with 750 million U.S. dollars bad loans, which constitutes about 15 percent of total banking loans.

The NPLs were contracted after the country adopted the multiple currency regime in 2009 following the collapse of the Zimbabwe dollar due to hyperinflation.

The government then created the Zimbabwe Asset Management Company to acquire eligible non-performing loans to clear the balance sheets of banks and enable them to underwrite more business and contribute to economic growth.

"Let me hasten to say that this company will not take over any loans which were recklessly given without appropriate security," the minister said while responding to a question from a fellow legislator in parliament.

The Reserve Bank of Zimbabwe said in a banking sector report this week that various other measures were being pursued to reduce the high NPLs and clean up the balance sheets of financial institutions.

These included the creation of a credit reference system to address information asymmetry and credit culture.

"On their part, banking institutions have instituted various measures to resolve the NPLs including the formation of dedicated loan recoveries units, refining of credit underwriting standards as well as restructuring of some facilities," the RBZ said.

The bad loans gradually rose from less than 2 percent in 2009 to 7.35 percent in 2012 before reaching a peak of 15.92 percent in 2014.

The bad loans currently stand at 15.19 percent as at March 31, 2015. Endi